On the romance between Nigeria and China

The Finance Minister, Kemi Adeosun, says Nigeria doesn’t need loans from the IMF to survive. We have found a new bride – China. The Chinese has also welcomed us with a warm embrace – a brotherly love – it looks like real love. Sadly, individuals might fall in love, but nations don’t – they only have interests.

Former Presidents Obasanjo and Jonathan have been ‘toasting’ this bride, but it seems she has made up her mind to now get married to Nigeria. During the courtship with our past Presidents, we signed many deals that never saw the light of the day.

In our romance with China, and in an attempt to reduce our dollar dependence, we are going to convert more of our foreign reserves to Yuan (as at 2014, two percent of our reserve was in Yuan). Most of the much talked about loans might actually be in Yuan.

We are falling in love with the Yuan at a time the currency is struggling for its life. In fact, last year it was on life support. About 1 trillion dollars of investment money left China last year. Compare this with how investors took away their money from our Stock Exchange – this put pressure on the naira.

When dollars leave your country, it means investors are trading your currency for the dollar. This puts enormous pressure on your currency. China has tried to offset this pressure on its Yuan by using its enormous reserves to shore up the currency.

Just as Nigeria’s support for its currency is unsustainable, analysts believe that China’s ability to continue using its reserve to support its currency is unsustainable – China burned about 108 billion dollars in December and 99.5 billion dollars in January trying to support its currency.

Interestingly, our beloved country sees no other bride than China’s Yuan. Probably, Nigeria thinks the breathing tube has been taken out and the currency is no longer in the emergency care ward. Really?

In trying to support its currency, China placed serious capital controls. Presently, you cannot take more than 50,000 dollars out of the country each year. I wonder how the much talked about corporation with China will work with this capital control. How can our businessmen, who will ‘start exporting’ to China, fare with this control.

Currently, China’s economy is beginning to stabilize after its currency and stock market almost crashed last year. How is China stabilizing its economy? By pumping money into the economy- by stimulus.

There is easy Yuan in China at the moment. Sadly, our beloved country is chasing this easy Yuan.

The BBC’s Asian Business Correspondent, Karishma Vaswani, asked in her April 15 piece, where these stimulus money was coming from. China’s Central Bank has opened the tap for the Yuan to flow.

Yuan is flowing in China, and we are rushing to collect these easy notes, shouldn’t we have a rethink? We might probably use our scarce dollars in our reserve to buy these easy notes.

The US has stopped Quantitative Easing (QE) – there are no longer easy dollars, anymore. Aren’t we better off with the dollar? Never mind we are having lots of problems with the dollar currently. My uncle always tells me that the devil you know is better than the devil you don’t know.

We are probably running away from Western creditors because of the conditions they are giving us. The IMF has asked us to increase our VAT and to devalue our currency. China will also give us terrible conditions – I am sure you know that – they just gave us the easy one about Taiwan.

Presently, China is engaging in a lot of reforms and strategies to shore up its currency, in order to avoid a currency crisis. I am sure we will be helping them by converting our reserves to Yuan. And of course, trading in Yuan.

We need China, no doubt. China might be able to keep supporting its currency with their 3.23 trillion dollar reserve. They might also change their mind at some point – thus crashing the value of the Yuan we might be holding in our reserve.

Also, the pressure on the Yuan might reduce at some point – no one is sure of this, yet. At the moment, we might be at the mercy of the Peoples Bank of China (PBOC), another name for China’s Central Bank.

Did I hear you say that beggars can’t be choosers? We might not be as poor as it seems. We might not have cash, but we have assets. Why can’t we sell these assets and get the money to run this country. Presently, our fellow countrymen are dying of hunger and disease.

The aim of this piece is for Nigeria to ‘shine its eyes’. All that glitters is not gold.